Would you like to ramp up your e-commerce capabilities? The good news is that there are plenty of options out there from which to choose, as we see inPart 1 of this two-part series. With ongoing technological and business development, more and more of them offer the potential to realize your goals, but making the right selection can be a daunting task.
Still, in many ways, that’s just the beginning. Once you have chosen your system, there is still the challenge of getting it — and keeping it — up.
Jumping on the Hosted Bandwagon
There are two basic options when it comes to deploying, running and maintaining a vendor-supplied e-business system: in-house and hosted. The latter has quickly grown in popularity.Comergent, for example, began offering a hosted platform around two years ago, and it is now the preferred choice of the company’s customers, according to President and CEO Jean Kovacs.
Vendors such as Comergent have been able to address customers’ initial reservations with regard to security, reliability and performance, she said, paving the way for growing customer confidence in and acceptance of hosted-system solutions.
“Thirty to 40 percent of our customer base is now running the system on a hosted basis,” Kovacs noted. “It’s becoming much more accepted. They’re now comfortable regarding the security of hosted services like ours, as well as its potential to improve their competitiveness in the marketplace. It really comes down to the question, ‘Do we have the IT resources, or are we better off utilizing someone else’s?'”
A further point to consider with regard to hosted e-commerce platforms is whether to opt for a shared instance or dedicated instance offering. In a shared instance hosting agreement, the code, systems architecture and infrastructure — such as servers and databases — are shared by multiple tenants.
The SaaS Model
One instance of the code supports multiple online sites and channels in what has come to be known as the Software-as-a-Service (SaaS) model, the advantage being that vendors can offer their services at cheaper prices by spreading operating and maintenance costs over multiple customers, wrote Forrester analyst Tamara Mendelsohn in her March 2006 report, “Making Sense of Hosted Commerce Platforms.”
“This makes the shared-instance model a good fit for firms that have limited budget and IT resources but want to stay close to leading eCommerce functionality, and feel more comfortable renting the technology platform with a shorter-term commitment,” she continued.
In a dedicated- or single-instance hosted deployment, by contrast, one instance of the code, along with the required infrastructure and architecture, is used to support the agreed upon e-commerce functions of one customer.
“It offers firms the utmost flexibility and control over their commerce platform,” explained Mendelsohn in her report. “Many firms choose this option due to regulatory constraints, while others with more complex business models and processes to support covet the control of code in hand.”
This option makes sense for companies that can allocate the necessary resources, she added, and that want absolute control of their online channel as well as the option to eventually bring the platform in-house.
Companies that have sufficient IT staff and resources and want complete control of their e-commerce channels tend to opt for in-house deployment from the beginning. This is especially the case where companies are running large systems in complex environments.
While the initial cost of ownership is relatively high, in-house deployment can work out to be a cheaper, more cost-effective option over a five-year period, Forrester’s Wang noted. While companies choosing to deploy in-house bear the costs of hardware, operation and some maintenance — perhaps including upgrades, patch and bug fixes — they can manage their IT costs directly, he added.
Licensing Options Emerge
Basic licensing elements can be combined in many ways to suit the needs of particular customers. Industry participants, as well as observers, expect that new and novel licensing options will be introduced as vendors continue to gain experience interacting with a broader range of customers and deepen their technological and functional business expertise.
For instance, Sterling Commerce Supply Chain Application Suite customers generally license the system on a perpetual basis, but term licenses may be offered for customers where appropriate, explained Laxman Mandayam, product line manager for Sterling Commerce’s Distributed Order Management Solutions.
Sterling is also offering a somewhat unique twist, licensing and managing all or part of its application suite on a service basis for targeted customers, he added. Acting as an application managed services provider (MSP), Sterling earns its fee on a per transaction basis or through subscription payments.
“We consider this an emerging opportunity. We are managing a particular part [of the system] — the application — for the customer,” Mandayam explained. “We do not host it; either the customer does or it’s hosted by a third-party provider.”
Another recent trend developing in the market is that some companies initially enter into a hosted platform licensing agreement with an eye toward eventually bringing it in-house, said Forrester’s Wang. “This trend is key, because not all vendors make it that easy to take the box and just send it back to the client. However, as we see more mixed mode operations, this will become a key requirement.”
The Burger King Mantra
E-business and order management systems have evolved rather quickly in response to market demands and technological developments, but there is still a considerable way to go.
“Enterprises believed that maintenance costs were too high, license metrics too complex and licensing policies too rigid,” states a January 2006 Forrester research report. Less than six months into 2006, it is apparent that at least some, if not all, of these issues are being addressed — and rather quickly.
With the development of what at least one longstanding technology research provider considers to be true order hubs available in the marketplace, the state of play in the e-business systems licensing market — at least from the vendor’s perspective — can be summed up by Comergent’s Jean Kovacs: “Our mantra is the old Burger King tagline, ‘Have it your way.’
“It’s all about flexibility, providing the flexibility for our customers to tailor the platform so that it best fits their needs and their goals,” she concluded.